Wednesday, April 21, 2010

Tory attack on Green economic policies is damp and time-expired sqib

Charlotte Vere, Caroline Lucas' Conservative opponent in Brighton Pavilion, tweets "Green Party's take on the economy doesn't stack up". The link leads to the illustrious Adam Smith Institute, where a distinctly non-illustrious attack on Green economic policies staggers into view.

The article, by one Nikhil Arora, begins with a defence of the banker's bonus culture. "Naturally, the Greens know better than anyone else in history how to set price controls without destroying wealth creation. And it goes without saying that they presume to dictate how much other peoples’ labour is worth". (Note: he is being ironic). OK, guilty as charged - we do presume to know when a banker is overpaid, especially someone like "Sir" Fred Goodwin, who still has his huge bonus and pension despite the gargantuan negligence in buying a whole bank full of debt.

Next, he attacks our proposal to increase the Minimum Wage, comparing it to Labour's blunder in increasing NIC. Although both would increase the wage bill, which is not ideal in a recession, there is a significant difference; the NIC is a tax on jobs, and the money goes to the Treasury. The Minimum Wage is a boost to the poorest section of the economy, and acts to reduce the Rich Poor Gap, which is a Good Thing for All.  The business community has cried wolf over the Minimum Wage for too long; they warned that it would bring about the end of civilisation as we know it when it was brought in, and it did not.

In fact, it raises the Tories' Achilles Heel: the question that they dodge is this: "Do the Tories aim to reduce the Rich Poor Gap, or not?" If they do not, then their hope to produce a "Big Society", (which I take to mean a cohesive society) is doomed to fail. If they do, they are going to have to come up with some pretty non-Tory economic policies within the next 16 days.

The article re-issues the tired call for voluntary action by corporations to tackle environmental problems. There is no evidence that voluntary action works, apart from the work of committed pioneers like the Body Shop. All the rest is greenwash.

Arora concludes that action to tackle climate change would wreck the world's economy. This begs the question of what climate change itself will do to the world's economy, and also raises the question of whether Arora is one of the climate change sceptics that infest the Conservative Party? The Stern Review give the lie to the idea that tackling climate change is bad for the economy.

How are the mighty fallen! Adam Smith was a great economist for his time, and not at all the neo-liberal that hid devotees imagine.

If this scrap of polemic against the Green economic policy is the best the Tories can do, they richly deserve to lose not just in Brighton Pavilion, but throughout the country.


Adam Ramsay said...

Sorry, I'm afraid I didn't read most of your piece. I just can't take the Adam Smith institute seriously since they a) were cheer-laders in chief for the economic system which got us into this mess, and b) paid for a pop song in Botswana promoting water privatisation which led to disaster. I assume they are in fact a surrealist Chris Morris parody?

Nikhil said...

I have posted a long response to your article at the Adam Smith Institute blog - I tried to post it here but the word limit stopped me.

With regards to what Adam Ramsey said, the ASI were not, and never have been cheerleaders for loose monetary policy, fractional reserve banking and fiscal irresponsibility. Adam's failure to understand that our current mess is not the result of free-markets, but the result of poor governmental decisions and incompetent regulators shows that he simply doesn't know what he's talking about.

Water privatisation in Botswana? I cant seem to find any evidence on it being a failure, but even if it was, it certainly wasn't anything to do with the Adam Smith Institute (it could have been proposed by Adam Smith International, which is a separate organisation that specialises in poverty alleviation in the developing world).

Phil said...

Oh dear, Nikhil, was that the best you could do?

DocRichard said...

Hi Nikhil
I will post to both places too. I'll answer your second point first, because I have it here on the clipboard, while the first point is away waiting moderation, so I cannot copy it.

2. I note that you dislike the minimum Wage. It is not something I am well read in; the view I have from the media is that it was opposed very strongly and loudly, and when it came in, the dire warnings were not realised. I can see that it puts up the wage bill, but it also helps to address the RPG, which will carry many societal benefits, so it is arguably a good investment.

You point to negative effects. Others here can list the positive effects. We have to accept that politics is a matter of trying to do more good than harm.

DocRichard said...

Point 3:
Nikhil: "What is this obsession with the Rich-Poor Gap? I want to make one thing very clear – I am not particularly concerned by the rich-poor gap".

Well, Nikhil, you should be. This is where you need to go and read a book. I do not often say this, as I am not a good book reader myself, (I spend too much time reading the screen) but the Spirit Level is a must read for anyone interested in politics and economics.

DocRichard said...

Point 2 again:
NA "There are plenty of far better moves to aid those on low income, such as ending the perverse situation in which those on the lowest incomes (thus subsidised by the government) have to pay income tax to that same government".

I agree, this is inefficient, and I believe the LibDems want to end it. I'm not sure if it is in our manifesto, maybe someone here knows.
However, this would be a partial solution; in dealing with systems, we may need to affect more than one component to get change.

You do not want a Minimum Wage, let alone the Greens' increased Minimum Wage, because you want to leave it all to the free market. Sorry, but the market, left to its own devices, has unacceptable intermittencies. As a psychiatrist, I would say that the free market has distinct bipolar features. The economic mood swings intrinsic to FMF cause harm to people and planet, and so they must be moderated. The Green economy requires a moderated, or guided market.

DocRichard said...

NA: The basic thrust of all this is that, no matter what the Greens, or anyone else says, you cannot simply legislate your way to wealth. With all the legislation we have from Whitehall and Brussels, if that were possible, we would be living in a utopia by now.

RL: Agreed, wealth has to be created, using the resources provided by the planet, acted upon by human skill and intelligence.

The thing about legislation is that it can be stupid sometimes. The existence of stupid legislation does not mean that wise legislation is not possible.

DocRichard said...

ON climate change, please take a look here:

And, regarding your sceptical stance, take a look here:

DocRichard said...

I also didn’t mention anything about ‘corporations making voluntary contributions’ at all. Seeing as it is individuals that I am primarily concerned with philosophically, I would argue that any individual who feels strongly about the environment should recycle, bike to work and fly less if that is what they wish to do.
My problem comes when eco-fascists use the government to force others to live how they order them to.

RL: This is the crux of the matter. I have discussed individualism here:

and here

I could invoke what's-his-names Law on the "eco-fascism" slur, but will let it pass, because this is an important debate.

The key point is that we may be different individuals, but you share the same environment.
Take a simple analogy: it is possible for 2 people to share the same bed quite happily. However, if one of them decides that it really does not matter to him as an individual if he does his poo in the bed rather than in the toilet, then the other one is entitled to challenge his behaviour.

If our behaviour is endangering the health of our common environment, then we all have to change our behaviour. You may call this fascism; we call it common sense.

Nikhil said...


I like your mentioning of the fact that you didn't mention 'Godwins Law' (I assume that is what you meant re: eco-fascism). However I am quite proud to believe in what you call 'free-market fundamentalism' (which to me, doesn't carry negative connotations - it creates wealth, reduces poverty and human suffering, and encourages peaceful cooperation between people who have never even heard of each other, from different races, ages, backgrounds and countries -which I find positively beautiful).

However, fascism as an ideology (which is not something I would be proud to be associated with) was around long before Hitler, whom Godwins Law sets as a focus. It is a system of strong central government that forces people to comply to a particular ideology and exercises strong control (if not ownership, a la socialism) over the means of production in the economy, particularly with a focus on central planning, rather than market-forces. Hence 1. Reagan's comment that the New Deal was inherently 'fascist' does not have anything to do with Hitler, and 2. Although many aspects of Obama's policies are dangerous and misguided, he is not, as some people say when they lose their cool, 'a Nazi'.

The reason for the eco-fascist epithet is the Greens' desire for authoritarianism - it is not enough to persuade and allow people to act 'greenly', they must be forced to do so.

With regards comments from Phil and Adam above, if they still disagree with my claim that free-markets didn't cause the crisis, but feel my earlier response was too pithy, why not see this article, which goes into more depth than I have time to at the moment:

Richard, I will write more detailed responses to your claims on the ASI blog, when I have some time - probably this weekend.

Nikhil said...

Trust me, Richard, I have read a lot of legislation on varying subjects, and the overwhelming majority of it is stupid.

This is not through any fault of the people who write it, and especially not the fault of those, like yourself who argue for it with good intentions. It is chiefly to do with what Hayek called the ‘fatal conceit’ of people to assume they can design complex systems for millions of people from an office in Whitehall.

The test should always be a strict one – the legislation has to demonstrate its effects to be positive before it is passed, without it having the benefit of doubt.

Besides, as I have explained, it is poverty which is the problem. Poverty is the absence of wealth. You cannot legislate your way to wealth. Therefore, under my threshold test, any legislation faces a real uphill struggle.

Nikhil said...

I’m sorry but the Pascal’s wager argument made me smile – if that argument isn’t strong enough to persuade me to believe in an all-powerful being that created the universe, it is unlikely to sway me over the scare-mongering on climate change.

Not least because you massively underestimate the costs that would be imposed by the policies you advocate. As I have said, if the costs are so small (as in Pascals wager, they need to be to stir people into action) then why do you need the coercive power of the state to get them passed? Things with minor costs are usually undertaken voluntarily – i.e the minor costs of re-using Marks and Spenmcers plastic bags. Only major costs need the government’s guns to back them up!

Your comments on individualism, and particularly the Objectivist thinking of Ayn Rand, are little more than straw man arguments. If you define individualism as isolationism or anti-social behaviour, it is obviously going to be easy to attack. But believe me when I say that it is you alone who does this. Individualists and capitalists don’t do anything of the sort. Individualism is a theory of voluntary cooperation, which has been magnificently successful at creating wealth and ending poverty, and has dramatically increased the standard of living for billions of people.

Moreover, it has strong deontological ethical ramifications, because it is the only form of political philosophy that treats individuals as ends in themselves, rather than means to an end. It rests on the axiom that everyone owns their own life, and that only by persuading, not forcing, people can things be ethically achieved. That is far stronger, from a moral perspctive, than any form of collectivism, which relegates the individual to merely part of a group, and uses him/her to achieve some goal for that group.

If you really wanted to attack Rand, I would first suggest reading the books, but if not, google ‘Ayn Rand lexicon’ for some quotations so that you can actually understand what the philosophy is about, even if you disagree with it, rather than just attacking your straw man conception of what ‘individualism’ is.

Nikhil said...

If I accept that our behaviour is damaging the common environment, which is actually quite distinct from what you’re saying, because everything we do has an effect on the environment in some form, the key question is one of trade-offs. Even if I accept that the costs will be catastrophic, which certainly hasn’t been proved, that alone isn’t necessarily a case for massive government intervention (particularly if such intervention does more harm than good). Look at the debacle caused by government intervention in favour of biofuels for a recent example.

Your analogy about two people sharing a bed is also a weak one, because it does not follow that government intervention or force is necessarily the inevitable, or just, consequence. Those two people may never sleep together again, but they can do that perfectly comfortably without fighting.

Furthermore, the damage done is immediate, and easily quantifiable – something that environmentalist scaremongering certainly isn’t. Predictions of that nature, which are not scientific, but rather economic and societal, are notoriously inaccurate, and with good reason – it is just impossible to predict from a centralised perspective what will happen in the interactions between billions of people. A friend of mine wrote a paper for the Adam Smith Institute in which he showed how wildly inaccurate Treasury predictions turn out to be only a couple years down the line. Hence why global warming catastrophe predictions are largely nonsense. Again see Hayek’s fatal conceit and the resulting information problems.

Nikhil said...

What about the market is bipolar? The market is relatively predictable in a generalised macroeconomic sense, and certainly much more so than government action. Several people have written, as the first example that came to mind, of the trouble in long-term planning for the NHS because of the fact that governments change, and particular governments change their minds, according to the whim of the people. Business priorities in any one situation are generally much more easily discernable than government ones.

It is very clear that, no matter what field you are looking at, ‘incentives matter’, ‘supply and demand’ etc all play their part, which is why the effects of government actions on markets are normally predictable to some degree. Witness the loose monetary policy causing mal-investments in things like housing, over the last decade as an example, but the point shouldn’t really be in dispute. Therefore, it is certainly not markets that show signs of psychological illness, at least, not when left to function freely. The government on the other hand…

‘The Green economy requires a guided or moderated market’ – guided by who, or by what standard – see the Hayekian knowledge problem again.

Your idea to force people to a 10 or 20 x pay scale would lead to some silly consequences – Microsoft would have to pay their lowest-paid employees a few hundred million per year to keep pace with Bill Gates, would they? How would you deal with the property rights of Bill Gates in whatever money was left over if you simply forcefully reduced all the wages? Or do you not care about property rights? What would you do about the self-employed – how would their earnings be linked to other people?

Most damning of all, how do you overcome Robert Nozick’s ‘Wilt Chamberlain Problem’ in a system of enforced equality of outcome. This is why individualism is superior as a philosophy, because forcing equality on people ultimately results in having to enforce most aspects of people’s lives. That is the basis for Hayek’s Road to Serfdom, which I sincerely suggest you read. Even my former labour law tutor, who was incredibly left-wing, said he found Hayek’s objections very difficult to overcome, and Hayek was certainly a more articulate advocate for freedom than I am.

Nikhil said...

I liked your defence of free speech, and must say that, when I studied defamation law, I argued in favour of several of the reforms you suggested, so that’s not really a major bone of contention.

You’re idea for ‘Parliament shall pass no law abridging freedom of speech’ was music to my libertarian ears, but I think it would mark you out as unusual on the left to defend free speech to such a degree – what are your views on ‘Citizens United v Federal Election Commission’?

Your criticisms of limited liability elsewhere on your website are misplaced. It’s a valuable institution in our economy, and in no way is it unique to massive corporations. You’re a doctor, right, so if you were to go into partnership with another doctor, do you really mean to say that you wouldn’t want to limit your personal assets from claims for negligence made against him/her? Limiting liability is an entirely reasonable action that is open and honest and simply doesn’t harm anyone. It is useful for much the same reason that we allow individuals to have bankruptcy protection, rather than chucking them in the debtors prison, like they did 200 years ago.

Making shareholders accountable personally for any harm done by a corporation would be great... For tort lawyers. It would give them an almost unlimited pot to go after when suing a corporation. I studied company law in Paris and can tell you there are a lot of problems with such a scheme. To take an extreme example, what’s to stop a small investor who’s put £1000 in his portfolio from losing his house when a corporation he invested in was sued?

Your contention that people or organisations can have a fair trial when they have no other rights protected is an interesting one. It sounds to me like it’s about as useful as a provision of the North Korean or Zimbabwean constitutions offering similar ‘protection’. What problems do you think having the Council of Europe take such a measure would solve, exactly? Off the top of my head, seeing as most of our newspapers are run by corporations, wouldn’t this mean that their Article 10 rights to free speech would be lost? What would that do for freedom and independence of the press? In your attempt to get to the devil you see you have cut through all the law that can keep you safe. You are so infatuated with the idea that corporations are evil, that you would throw away some very basic rights – property, contract and speech, just to get at them.

Nikhil said...

Again on the rich-poor gap, you cite a book that has about as much scientific credibility as that doctor who started the MMR scare. It has been thoroughly debunked, partly by Tim Worstall at, but in more detail over several articles on this blog:

Essentially, the evidence clearly doesn’t show what the authors say it shows. They don’t present an argument backed by evidence, but an argument decorated with evidence, which, as you are a medical doctor you know full well, wouldn’t make it anywhere in a peer review study, yet works wonders when released to the public who have neither time nor inclination to search the 200-odd scientifically conducted pieces of research.

They have some serious issues with causation and correlation as well, which kind of undermine the whole idea, really.

On a more anecdotal note, anyone who thinks Japan has an egalitarian society clearly hasn’t been there. I have spent a lot of time there, and although my spoken Japanese is at only a low conversational level, I have talked with enough people to think the authors claims in that regard are nonsense. Besides, anyone who thinks that obesity is 6 times more likely in the USA than Japan BECAUSE of some inequality difference clearly doesn’t know anything about Japan or Japanese culture or eating habits at all.

Relative poverty really isn’t relevant for anything other than old-fashioned jealousy politics, which, frankly is the last thing we need in Britain right now. It is absolute poverty which is a problem, and well-intentioned but misguided massive restrictions on energy production will increase THAT measure around the world, hitting the poorest people on the planet the most.

DocRichard said...

Godwin. That's the one.

On you will find that Greens are in the social/libertarian quadrant, diametrically opposite the LabLibCon position, who are much closer to authoritarianism.

DocRichard said...

Based on my experience of legislators I agree that in many cases they seem strangers to reason. Afghan opium being an example. (see tag)

You seem to be going further, condemning legislation per se.

DocRichard said...

Climate Change
It seems you are a sceptic. Please read the FAQs here.

The evidence for AGW is in a different order from the evidence for Pascal's God, since AGW is based on a vast body of science. Pascal's wager is based on the fate of an individual soul; AGW is based on no less than the future of human civilisation.

To reiterate and summarise: even if AGW were to be proven wrong, the economic action taken to avoid AGW would still be advantageous in meeting the challenge of Peak Oil.

DocRichard said...

The idea of voluntary co-operation, and enlightened self-interest is fine, and an example of individualism recognising our social aspect.

However, there is an inherent tendency for individuals (or corporations, as individuals in law) to relapse into sociopathy. Trafigura is an example.

Your view of the free market as providing wealth for all is rose-tinted. Trickle down economics is an illusion, and too often, the voluntarily co-operating, successful individuals in corporations entirely lose sight of the individuals in the vicinity of their operations who are damaged, and whose environment is damaged, by their corporate activities.

DocRichard said...

Bipolar market
NA: "What about the market is bipolar?"
RL: Boom and bust. The analogy with bipolar disorder is striking: a perception of great monetary wealth alternating with a perception of monetary deficit; hyperactivity alternating with depressed inactivity.

We have no problem with incentives and supply and demand. Where we differ is that for you, they constitute the whole picture. For us, they are a part of the picture.

DocRichard said...

Guided Market
NA: ‘The Green economy requires a guided or moderated market’ – guided by who, or by what standard –
RL: Guided by the three axioms of green economics.
* It is impossible to expand forever into a finite space
* It is impossible to take forever from a finite resource.
* Everything is interconnected.
These are to be informed by the best possible scientific evidence, which will lead to policy principles.

For instance the key policy principle for the 21st century is this: "It is necessary to decarbonise the global economy". This leads to market interventions to increase the price of carbon, both through carbon taxes and also through the setting of quotas, while at the same time incentivising conservation and renewable energy.

DocRichard said...

Limited Liability
The proposal is that liability is to come back to the shareholders in the event that their company causes injury.

DocRichard said...

Nikhil, this is really where our debate lies. I will go study your links, and make it the subject of a full blog. Here I will just say that it is a book based on many papers published in scientific journals. As with the scientific evidence for global warming, it looks as if you find the conclusions incompatible with your ideology, and will therefore reject the science.

As I said, this is an important debate, because I think it is the critical debate of our time - a clash between individualist idealism and ecological realism.

I have been brief here because I should really be debating with the Conservative Party on these matters, and you began by dissociating yourself from that embattled organisation.

DocRichard said...

Ayn Rand on individualism:
"Individualism regards man—every man—as an independent, sovereign entity who possesses an inalienable right to his own life, a right derived from his nature as a rational being. Individualism holds that a civilized society, or any form of association, cooperation or peaceful coexistence among men, can be achieved only on the basis of the recognition of individual rights—and that a group, as such, has no rights other than the individual rights of its members."

Which is precisely my point. No straw man here. Humans are _not_ independent sovereign entities. We are entities that are dependent on our biosphere and on our society (we are social animals). That is axiomatic, and also scientific fact.

So I trust you will excuse me, Nikhil, if I spare myself the task of entering a house build on a foundation of sand.

Having differentiated Green from Individualism, we now differentiate Green from socialism, if Socialism is taken as the ideology that absolutises the social aspect of humanity. (They will no doubt say this is a straw man). Our refutation is exactly the same - social humanity is not a sovereign and independent being in itself, it is dependent on the biosphere which supports it, as well as on the health and freedom of the individuals that constitute it.

I hoe that helps to clarify the situation.